The news last week that the Libyan Prime Minister, Ali Zedan, had been kidnapped by a former rebel group resulted in an increase in the price of Brent crude amid concerns of the ability of the Libyan state to assert it’s control over the country.
Since the revolution of 2011, that overthrew Muammer Gaddafi, the control of Libya’s vast oil fields has been widely fought over.
Oil revenue is key to the Libyan economy, providing the majority of government revenues. However, a combination of militias and striking workers has halted work at the oilfields, costing the government an estimated $5 billion in lost revenues.
The Great Socialist People’s Libyan Arab Jamahiriya of Muammer Gaddafi was overthrown in 2011 ending the reign of one of the longest serving arab dictators. Through the primary movers of militia groups, Gaddafi was publicly executed and paraded through the streets. These groups, however, have since been a blight on the new Libyan state, with the groups exercising autonomous control over entire regions and working in the role of state security.
Many of the militias, on the outbreak of violence, took control of oilfields across the country, recognizing the importance and wealth of the commodity to the country.
The Libyan Prime Minister, Ali Zedan, was arrested by a militia group known as the Libya Revolutionary Operations Room as a result of his involvement in the US capture of Al-Qaeda suspect Abu Anas al-Liby.
After the news of the release of the Prime Minister, Ali Zedan, the price of Bent Crude rose towards $110, $1.10 higher than at the end of the previous session.
With the state of Libya still uncertain, the ability of the country to maintain oil exports are being brought into question. Turmoil across the country led to output dropping to its lowest point post the 2011 revolution earlier this year with an output of 300,000 barrels a day, however, the recent trend has been increasing with the country’s output reaching 700,000 barrels per day.
Strikes earlier in the week halted operations at the oilfields and ports of Libya reversing this trend, with the main oil port of Es Sider being brought to a complete halt as a result of the striking oil guards.
Further alteration in the price of global crude came from apparent movement in Washington. With signs in the US that the parties will reach an agreement regarding an increase in the country’s debt ceiling, further gains to crude were seen on global markets. After being deadlocked, the Democrats and Republicans in the US Congress appear to have moved closer towards increasing the $16.7 trillion debt ceiling.
The deadlock has led to the price of crude falling to $103 a barrel, but early morning indicators contributed to the price rising.
BY: Richard Harrison
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